Pound US dollar (GBP/USD) exchange rate climbs amid risk-on flows
The pound US dollar (GBP/USD) exchange rate is gaining ground this morning as an upbeat market mood is supporting the currency pairing ahead of the Bank of England’s (BoE) and the Federal Reserve’s latest interest rate decisions.
At the time of writing, GBP/USD is trading at around $1.2923, up roughly 0.3% from this morning’s opening levels.
Pound (GBP) wavers ahead of BoE meeting, bolstered by cheery trade
The pound (GBP) is trading in a wide range this morning, firming against its safer assets but faltering against its riskier peers, thanks to the British currency’s nature as an increasingly risk-sensitive currency.
GBP investors may also be reluctant to place any overly aggressive bets on Sterling ahead of the Bank of England’s forthcoming interest rate decision scheduled for release later this afternoon.
As markets are widely expecting the BoE to enact a 25 basis-point interest rate cut, GBP exchange rates may be largely muted following the expected cut.
However, investors will look ahead to the central bank’s accompanying forward guidance which could still see the Pound slip should BoE officials hint at another cut in December.
US dollar (USD) undermined by positive trade ahead of Fed rate decision
The US dollar (USD) is slipping against the majority of its peers this morning just one day after a USD rally following Donald Trump’s Presidential victory yesterday morning.
However, a bout of cheery trade this morning is sapping demand for the US dollar on the back of its status as a safe-haven currency.
Furthermore, similarly to the pound, USD inverts are also likely cautious about implementing any overly bold moves on the ‘greenback’ ahead of the Federal Reserve’s upcoming interest rate meeting, scheduled for release later this evening.
The US central bank is also fully expected to deliver a 25-basis point interest rate cut today which could see USD exchange rates also largely unmoved.
However, following Trump’s victory as yesterday’s election, should the central bank hint at rates remaining higher for longer following the election, USD could in fact firm towards the latter stages of the data and potentially into tomorrow’s European session.
GBP/USD exchange rate forecast: currency pairing to be driven by risk appetite?
Looking ahead, the primary catalyst of movement for the pound US dollar exchange rate looking ahead to tomorrow will likely be market appetite for risk amid a lack of any significant economic drivers.
The only data release of note will come in the form of the US’s latest Michigan consumer sentiment index, scheduled for release towards the end of tomorrow’s European session.
This could see the ‘greenback’ firm should the data report yet another rise in domestic consumer confidence.